Understand What Voluntary Life Insurance Is And How It Works

Sep 29, 2022 By Susan Kelly

Insurance provides a sense of security and benefits in a time of need. There are many types of insurance that different institutions offer. But the most important one is that which provides coverage or protects the benefits of one's family or beneficiary after death.

Voluntary insurance is offered to employees by the employer in case of an employee's death, the insurance will pay cash benefits to the beneficiaries, and this type of insurance is cheaper than one taken directly from the insurance company.

The employee pays a monthly premium, or it is deducted from the employee's salary. Employer sponsorship makes these premiums less expensive and easy to pay for the employee.

How Does Voluntary Life Insurance Work?

Voluntary life insurance is paid as a monthly salary deduction from the employee's salary. The insurance policies are defined for a specific term or until you leave the job. You can also continue the insurance by converting it into whole life insurance, but the premium for this policy is higher than the other term policies.

Voluntary life insurance comes with additional benefits; you can also opt for these benefits or riders you can opt for, which increases the term of your basic life insurance policy. Some other optional benefits include:

Additional Life Insurance Policies:

Additional life insurance policies allow you to add additional individuals, like your spouse or children, but these additional policies provide smaller fixed amounts than the employee's voluntary policy.

Premium Coverage Waiver:

This additional clause ensures that the premium of the policy is covered if you cannot work due to any physical impairment, critical illness, and other similar conditions.


In some policies, employees can transfer their voluntary policy to personal policy if they are trying to switch from one job to another. But the perks of the voluntary policy when changed to personal one changes.

In a voluntary policy, an employer can be in a better position to negotiate terms because of a larger number or group of employees. In contrast, in an individual policy, a premium is also high. The portability terms in contract termination or resignation may also differ from policy to policy.

Accidental Death:

The availability of accidental death or dismemberment cover also varies from policy to policy; if it's available as a rider voluntary insurance policy, and in case of accidental death, the insurers get full cover or dismemberment.

Types of Voluntary Insurance Policy:

Voluntary life insurance policies are of two types: voluntary term life insurance and voluntary whole life insurance.

Voluntary Term Life Insurance:

Voluntary term life insurance provides death benefits to the beneficiaries for a certain time or term. Usually, it includes the span of 5, 10, or 15 years; it is the more common voluntary policy that employees opt for, as most employees work for a fixed time. Term policy is cheaper than the whole life policy, as they don't allow variable investing or increase in value.

Voluntary term policy is useful as a supplement policy to personal life policy; in this way, it provides more coverage to the beneficiaries in the event of policyholder death.

Voluntary Whole Life Insurance:

Voluntary whole life insurance is usually taken to continue your voluntary term policy; if you switch jobs, it's transformed into your policy with a relatively high premium. They are designed to provide cover for a lifetime, and your spouse, dependents, and other beneficiaries can be added with additional fees and act as a supplement to your policy.

Voluntary Dependent Life Insurance:

Voluntary dependent life insurance is the rider to your voluntary life insurance policy; it is cheaper than buying a new one. Usually, employees choose these options for their spouses and children.

  • Voluntary Spouse Life Insurance: Voluntary life insurance provides cash payouts to the spouse of the policyholder in case of their death in; case if the employee leaves their previous employers than to continue their voluntary insurance policy, they have to convert it into a personal policy, which is also available in two options, life term, and whole life policy.
  • Voluntary Child Life Insurance: Voluntary child life insurance is for employee children; it insures the children and their father gets the cash payout in case of their death. One notable thing is that the older the child is, the higher the premiums; it works with both whole life and term life insurance.

Things To Consider Before Opting For Voluntary Life Insurance:

Voluntary life insurance is a great way to provide extra financial coverage to your loved ones, but one should check all the terms and conditions before availing of it. But overall, it's a good way to protect your loved one from an unexpected death. Few things to take under consideration and understand before taking any voluntary life insurance:

  • How long are you going to serve in the same company or employer?
  • Does your policy provide the portability option if you switch your employer? What does the premium be in that particular case?
  • Is your policy term specific, or is it whole-life voluntary insurance?
  • Your health condition and how its effect the insurance premium.
  • If you already have any insurance, what level of coverage it provides, is there any important areas to consider as well?

Causes That Don't Come In Accidental Death:

Although the whole base of voluntary life insurance depends on the sudden or unexpected death, certain conditions are not covered in accidental death; if the death they caused by one of these events, it will not be covered by the insurance; they are:

  • Drug or Alcohol Consumption.
  • Natural Causes
  • Suicide

Final Thoughts:

Voluntary Life Insurance, with its financial coverage options, is an excellent way to provide extra financial protection to your family. With its short-term or whole-life plans, you can add many rider options, including spouse and children insurance. The voluntary life insurance premium is less than personal insurance plans; however, always check terms and conditions before going for any insurance policy.

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